OECD joins the rush to fiscal expansion – for now at least

In the last month or so, we have seen the IMF publish material that is critical of what they call neo-liberalism. They now claim that the sort of policies that the IMF and the OECD have championed for several decades have damaged the well-being of people and societies. They now advocate policy positions that are diametrically opposite their past recommendations (for example, in relation to capital controls). In the most recent OECD Economic Outlook we now read that their is an “urgent need” for fiscal expansion – for large-scale expenditure on public infrastructure and education – despite this organisation advocating the opposite policies at the height of the crisis. It is too early to say whether these ‘swallows’ constitute a break-down of the neo-liberal Groupthink that has dominated these institutions over the last several decades. But for now, we should welcome the change of position, albeit from elements within these institutions. They are now advocating policies that Modern Monetary Theory (MMT) proponents have consistently proposed throughout the crisis. If only! The damage caused by the interventions of the IMF and the OECD in advancing austerity would have been avoided had these new positions been taken early on in the crisis. The other question is who within these organisations is going to pay for their previous incompetence?

Read more

The Weekend Quiz – June 4-5, 2016 – answers and discussion

Here are the answers with discussion for this Weekend’s quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

Read more

The US government view of the 1976 sterling crisis

This blog continues the discussion of the British currency crisis in 1976. Today we discuss the way the US government was constructing the crisis. They had previously seen Europe in terms of military and political threats and had clearly developed a range of interventions in Europe (NATO, military bases etc) in response to their fear of Communism. But, it was clear that the US began to believe that the on-going financial turmoil that accompanied the OPEC oil shocks at a time when the world was trying to adjust to the collapse of the Bretton Woods system (and the Smithsonian agreement reprise), was undermining what they called their “assumptions of political stability” and increasing, in their paranoiac minds, the threat of the spread of communism. They considered that the IMF would have to be ‘steered’ to take a larger role in this period of turmoil to restore financial stability – a precondition for political stability (in their eyes). And if they couldn’t directly order the IMF to act in the perceived interests of the US government, then they would do it informally – through “‘conversations’ rather than meetings”. It is a very interesting period because the US clearly wanted to use the IMF to influence “the future shape of the political economy of Great Britain”. The ‘crisis’ was, in effect, manufactured to give those ambitions ‘ground cover’. At least, that is one plausible perspective of what happened in 1976.

Read more

ATTAC should drop the ATT part!

Last Thursday evening in Madrid, I was invited as a guest of the local ATTAC chapter to talk about the Eurozone at a public meeting. I say guest, because one would be excused for thinking that the local ATTAC President was in fact the guest given that he launched into a 25 minute diatribe, masquerading as the first question after my presentation, that attacked Modern Monetary Theory (MMT) for (allegedly) ignoring taxes (no: we just say they do not fund spending) and basic income (no: we just prefer employment guarantees). While it was obvious he hadn’t actually read my book (despite claiming to be commenting on it), he also claimed that I was just another apologist for capitalism and had failed to advocate any fundamental changes to the system. It was quite a performance as you might guess, but I thought it rather odd that the president of ATTAC, which takes its name from its principal advocacy of a Tobin Tax (financial transactions tax), a small little surcharge on the Wall Street excesses, rather than a head-on attack on the legitimacy of the financial markets in general, would dare criticise others for advocating policies within the capitalist realm. I have long written about the need to control financial speculation via regulation rather than through the ‘price system’ (by taxing it). Those who think that working through the price system is the way to change behaviour are operating within neo-liberal logic. It is much more effective to just work through the legal system and ban something that is damaging to the prosperity of nations. That is the MMT position on these financial market excesses – where they just involve wealth shuffling and serve no productive purpose, the state should just legislate them into oblivion. But the so-called revolutionary ATTAC (if my understanding of the president’s ravings were correct) just wants to impose a small tax on Wall Street. And, I guess they will have to go looking for the cash in Panama or somewhere!

Read more

There is no secular stagnation – just irresponsible fiscal policy

I am in Barcelona today until later then I am off to Valencia for two days. More on the Spanish tour later. The latest edition of the ECB’s Economic Bulletin released on May 5, 2016 carried and – Update on economic and monetary developments – provides more evidence, as if any was needed, that the current reliance on monetary policy – standard or otherwise – to reboot the stagnant economies of Europe has failed and will continue to fail. Why? It is the wrong policy tool. Journalists are increasingly writing that policy options are exhausted because central bankers ‘have fired all their shots’ and the “more shots they fire, the less effective they become”. The implication is that the world is locked into a future of secular stagnation with elevated levels of unemployment and low productivity growth. They seem to have forgotten that fiscal policy remains effective if it is used properly. There is no secular stagnation – just irresponsible fiscal policy use.

Read more

The Weekend Quiz – May 7-8, 2016 – answers and discussion

Here are the answers with discussion for the Weekend Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of modern monetary theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

Read more

The Weekend Quiz – April 30-31, 2016 – answers and discussion

Here are the answers with discussion for the Weekend Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of modern monetary theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

Read more

The 1976 currency crisis

Today, I take a further step in advancing our understanding of why the British government called in the IMF in 1976 and why it fell prey to a growing neo-liberal consensus, largely orchestrated by the Americans. The assertion by British Labour Prime Minster James Callaghan on September 28, 1976 that Britain had to end its ‘Keynesian’ inclinations and pursue widespread market deregulation and fiscal austerity has been taken to reflect a situation where the British government had no other alternative. His words have echoed down through the years and constituted one of the major turning points in ‘Left’ history. Successive, so-called progressive governments and politicians have repeated the words in one way or another. The impact has been that they have increasingly imbibed the neo-liberal Kool-Aid and have, seemingly forgotten that their were options at the time that the British government rejected, which would have significantly altered the course of history. The rejections were ideological rather than based on substance. For all intents and purposes, the British Labour Party, in government, had become the first practising neo-liberal government in British history. Britain just became a part of the US-led policy move that aimed to tilt the world economy heavily in favour of the profit-seeking aspirations of the corporate sector and the financial market sector (‘Wall Street’), in particular. The US government became the international political conduit for ‘Wall Street’ influence and the growing influence of the ‘City’ in London, also allowed these neo-liberal ideas to permeate the policy making circles in Britain. But it wasn’t just a permeation that was going on. The US used institutions such as the IMF to conduct brute force attacks on the prosperity of nations to undermine the viability of their public sectors and to shift more of the national income and national assets into the hands of capital. It was a brazen and very determined shift in world affairs. The ‘Left’ should never hold the decisions that were taken by the British government at the time as an inevitability of global capitalism.

Read more

The Weekend Quiz – April 23-24, 2016 – answers and discussion

Here are the answers with discussion for yesterday’s quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

Read more

Britain approaches the 1976 currency crisis

When the Labour Party resumed minority government in March 1974 after a close victory over the Tories in the February election, which had delivered a hung parliament, the British economy was in recession and inflation was running at 12.9 per cent. To resolve the political impasse, he called a further election on October 10, 1974 and gained a majority. The contraction in real GDP began in the third-quarter 1973 under the Tories as the Dash for Growth ended badly and Britain recorded three consecutive quarters of negative growth. Thus, British Labour was on the back foot from day one as a result of inheriting an economy that was in decline as a result of declining investment in best-practice technology as British capital sought lucrative speculative investments abroad. Productivity was falling and the scope for rising standards of living were becoming limited, thus intensifying the struggle over the distribution of income. Many coalmines, a major source of employment and growth, were also reaching the end of their economic life. However, key figures in the Labour government (such as the Chancellor Denis Healey) had fallen into the sway of the emerging Monetarist thinking, which had the consequence of elevating the fraught Monetarist causality to centre stage at the neglect of policies that might have actually addressed the underlying issues. The IMF entered the fray and made matters worse, as usual. Today, we trace the events leading up to this turning point.

Read more

The government has all the tools it needs, anytime, to resist recession

Several new articles have appeared in the last few weeks in the major media outlets expressing surprise that central banks have had little effect on economic growth despite the rather massive buildup of their ‘balance sheets’ via various types of quantitative easing programs. I have indicated before that I am coming to the view that most of the media, politicians, central bankers and other likely types (IMF and European Commission officials etc) seem to be in a constant state of ‘surprise’ as each day of reality fails to confirm what they said yesterday or last week (allowing for lags :-)). What a group of surprised people we have to effectively run our nations on behalf of capital. Poor souls, constantly be shocked out of their certainties. That is what Groupthink does – creates mobs that deny reality until it smacks them so hard in the face that they can only utter “that was surprising!” And in that context, the latest media trend appears to be something along the lines of ‘well let’s get the turbines moving’ or ‘those helicopters are about to launch’ and when we read that and what follows we learn that the media input into our lives only reinforces the smokescreen of ignorance that we conduct our daily lives within.

Read more

Don’t fall for the AAA rating myth

We once believed the Earth was flat. Then someone sailed out to the edge and came back the other way or something like that with apologies to Pythagoras and others in 5BC. At some other point in history, alchemists were convinced that they could take base metals (for example, lead) and turn them into ‘noble’ metals (like gold). More recently, the German Nazis convinced a nation that there was a Master Race (them) which had to purify civilisation by exterminating the parasitic (non-Aryan) races. The lowest races were considered to be Lebensunwertes Leben. Millions died unnecessary and cruel deaths as a result of that piece of national deception. Sometimes these demonstrations of national ignorance are relatively benign. Other times, as history shows the outcomes are devastating. The World is, once again, in the grip of another major deception, which is generating negative consequences at the worse end of the scale. As Australia approaches May, fiscal hysteria reaches its apex each year. Add the prospect of a general election (as early as July 2016) and the lying politicians and the media frenzy that support them extend themselves beyond the normal day to day idiocy and prevarication. On the world stage, the IMF prances around, wiping the blood of millions of citizens that it has impoverished over the years with its incompetence and bloody-mindedness, lecturing nations on what they should do next. Whenever, a nation follows their advice unemployment and poverty rises and the top-end-of-town walk off with even more loot. Loot is what pirates stole. These looters, however, do not even have the panache and elan that we associate with the romance of piracy. They are just sociopaths and cheats. Welcome to a new day in neo-liberal hell!

Read more

Cancel your subscriptions to Time Magazine

Ordinary citizens find it difficult expressing their dissatisfaction with the overall state of affairs in their nations. Sure enough we can vote a poor government out in many nations but the neo-liberal infestation is now so entrenched that the choices in terms of macroeconomic policy have narrowed to be no choice at all. At the corporate level, shareholders can cause trouble at annual meetings as they did last week in Australia when the bosses of the poorly-performed BP tried to push through a massive executive pay deal for themselves. 60 per cent of shareholders rejected the deal. But then not many of us a shareholders so that is a limited strategy. One thing we can do however is use our powers as consumers to punish corporations that lie to us in pursuit of profit. Consumers, united, do have power. Enough of us, pursuing a common goal, can send a corporation broke, just like the mainstream textbooks, which claim ‘consumer sovereignty’ drives the pattern of production, tell us. In this respect, I urge all readers of this blog to cancel any subscriptions that you might have to Time magazine and run a social media information campaign urging everyone you know (and everyone they know) to do the same. If you are a company who advertises in Time Magazine, I urge you to stop doing business with them. And then seek information on other products the owners of the magazine sell and boycott them too. That might given the company some reason to stop publishing erroneous material designed to distort the public debate.

Read more

Spanish government discretionary fiscal deficit rises and real GDP growth returns

I am off to Spain in a few weeks to undertake a lecture tour associated with the publication of a Spanish translation of my current book – Eurozone Dystopia: Groupthink and Denial on a Grand Scale (see details below if you are interested). I noted by way of passing in a blog last week that a recent article in Spain’s highest-circulation newspaper El País (March 31, 2016) – Public deficit for 2015 comes in at 5.2%, exceeding gloomiest forecasts. The latest data shows that the Spanish government is in breach of Eurozone fiscal rules and is growing strongly as a result. Those who claim that Spain demonstrates how fiscal austerity can promote growth should examine the data more closely. The reality is that as growth has returned (albeit now moderating again), the discretionary fiscal deficit (that component of the final deficit that reflects the policy choices of government) has increased. Government consumption and investment spending has supported the return to growth, which had collapsed under the burdens of fiscal austerity between 2010 and 2013. Spain demonstrates how responsible counter-cyclical fiscal policy works.

Read more

British trade unions in the early 1970s

The mainstream economics (by which I mean neo-classical economics and its siblings in a History of Economic Thought context) constructs trade unions as being market imperfections that interfere with the freedom of supply and demand to determine optimal price (wage) and quantity (employment) outcomes. The textbooks teach students that the supply of and demand for labour without the intrusion of trade unions (and other impositions from the state – minimum wages etc) will deliver optimal outcomes for all in accordance with the respective contributions of each ‘factor of production’ (labour, land, capital etc). The real world isn’t like that at all and the determination of shares in national income is the result of a continuous struggle between labour and capital for supremacy. It is very easy to construct the trade unions has job killers in this context and to blame them for inflationary outbreaks. That certainly is how the British trade unions in the early 1970s were constructed by the conservatives and later the Labour Party itself. By the early 1970s, Monetarism was gaining a dominant hold in the academy and strong adherents in policy circles. Trade unions were considered by the Monetarists to be ‘market imperfections’ that should be destroyed by legislative fiat. Governments came under intense pressure to introduce legislation that would constrain unions. However, once we understand history, we can see the early 1970s in Britain leading up to British Labour Prime Minster James Callaghan’s speech to Labour Party Conference held at Blackpool on September 28, 1976 in a different light. It also allows us to see just what surrender monkeys the British Labour Party became after that period. This is a further instalment of my next book on globalisation and the capacities of the nation-state, which I am working on with Italian journalist Thomas Fazi. We expect to finalise the manuscript in May 2016.

Read more

The CEDA Report – one of the worst ever

The public policy debate in Australia today has been hijacked by two ridiculous interventions. The first, being a proposal that the states be given back their income tax powers (which they voluntarily forfeited in 1942). It is an attempt to align the large spending responsibilities that the Constitution places on the state governments with the capacity to raise revenue. The ideology behind the conservative proposal is to reduce the size of the federal government and to increase the likelihood of a Eurozone-type crisis where the non-currency issuing states would not be able to maintain first-class health and education systems. A far better and more modern solution to the spending-revenue mismatch would be for the currency-issuing federal government to assume responsibility for large-scale public infrastructure, education, health and other related expenditure areas that are currently the responsibility of the states. I will leave that at that for the moment. The second intervention came in the form of a publication, released yesterday (March 29, 2016), by the so-called Committee for Economic Development of Australia (CEDA) – Deficit to balance: budget repair options – which has been in the headlines over the last 24 hours. All the media outlets have been salivating over this report – some calling it the work of a “high-powered … Commission”, and I have not read one report as yet, which has given it any form of critical scrutiny. All the reports on all media forms have essentially acted as amplifiers – as press agents for CEDA. Which only goes to show how our national media fails to serve the people in areas that are of crucial importance to our national prosperity. The fact that such a report gets any coverage also confirms that in these crucial areas of public life, the debate is conducted within a fog of ignorance and lies. Almost all of the propositions that form the basis of this Report are just ideological myths perpetuated to advance the interests of capital over the workers.

Read more

The Weekend Quiz – March 19-20, 2016 – answers and discussion

Here are the answers with discussion for the Weekend Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers.

I hope this helps you develop an understanding of Modern Monetary Theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

Read more

The Heath government was not Monetarist – that was left to the Labour Party

This blog provides another excerpt in the unfolding story about Britain and the IMF and the Monetarist sell-out by the British Labour Party once it was reelected in February 1974. As I noted in this blog – The British Monetarist infestation – I am currently working to pin down the historical turning points, which allowed neo-liberalism to take a dominant position in the policy debate. In doing so, I want to demonstrate why the ‘Social Democrat’ or ‘Left’ political parties, who still have pretentions to representing the progressive position (but have, in fact, become ‘austerity-lite’ merchants), were wrong to surrender to the neo-liberal macroeconomic Groupthink. This is a further instalment of my next book on globalisation and the capacities of the nation-state. Today, we trace the tensions within the Tory Party during the period 1970 to 1974, when the old school “One National Conservatism” represented by Edward Heath came into conflict with the growing Tory Monetarists, who would eventually be the bulwark of Margaret Thatcher’s pernicious regime later in the 1970s.

Read more

The Weekend Quiz – March 12-13, 2016 – answers and discussion

Here are the answers with discussion for yesterday’s quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of modern monetary theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

Read more

The neo-liberal class warfare on the poor and the rest of us

I read a report just released yesterday (March 9, 2016) – The uneven impact of welfare reformby the Centre for Regional Economic and Social Research, which is located at the Sheffield Hallam University in Britain. It showed that the British Government is successfully prosecuting a class war against the disadvantaged and, increasingly, against segments of ‘middle’ Britain. It confirms the view I formed in 2010 when the Conservative government was elected and announced its first fiscal statement in June of that year that it was intent on pursuing some unfinished business – to wit, entrenching the attacks on workers and income support recipients and redistributing national income in favour of capital. These attacks were somewhat interrupted by the urgency to deal with the meltdown associated with the GFC. Leopards don’t change their spots and the Conservatives are intent on finishing off the agenda that began back in the 1970s with the attacks on unions and public services. I was thinking about the report as I was reflecting on a radio program I heard the other day about how the Australian National Library is being forced to make severe cuts to its archival services among other things in response to federal government austerity plans. Mindless is the first word that came into my head when I was listening to the program. In the case of Britain, the attacks are being dressed up as ‘welfare reform’. In the case of Australia, the spending cuts are being dressed up as ‘efficiency dividends’. The neo-liberal nomenclature is an attempt to obscure what is really going on – a massive attack on society, its disadvantaged, and its cultural institutions. Neo-liberals hate society and anything that provides inclusive access to all in the benefits that society can deliver. These cuts are deliberately targeted to reduce social inclusion and undermine information access.

Read more
Back To Top